12/05/2009 - 09:38

Delays add $10m to Iluka's project

12/05/2009 - 09:38

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A further $10 million will be added to the budgeted capital cost of Iluka Resources' $209 million Murray Basin Stage 2 project after unexpected plant delays push back the start up date.

Delays add $10m to Iluka's project

A further $10 million will be added to the budgeted capital cost of Iluka Resources' $209 million Murray Basin Stage 2 project after unexpected plant delays push back the start up date.

Iluka had planned to start producing first heavy mineral concentrate in June, however was recently advised of a delay in the fabrication and delivery of structural frames for the pre-concentrator plant.

The frames are being fabricated in Geelong.

Iluka has now scheduled first production to start in August, around a six week delay to the original start up date.

"Capital expenditure for the project is expected to increase by around 5 per cent relative to the original budget of $209 million, due mainly to additional costs involved in maintaining contractors on site for longer together with additional owners costs," Iluka said.

As a result of the delay, the company has again revised down its calendar 2009 production guidance, cutting its rutile output by 15,000 tonnes and zircon production by 7,000t.

Last month, Iluka lowered its zircon and rutile production guidance by 20 per cent each to 352,000t and 232,000t respectively.

Shares in Iluka shed two cents to $3.33 at 11:15 AEST.

 

 

The announcement is below:

 

Iluka Resources Limited ("Iluka") advised in its March Quarter 2009 Production and Development Report (issued 16 April 2009) that the Murray Basin Stage 2 project in Victoria was scheduled to commission progressively through the current June quarter, with the expectation that first heavy mineral concentrate would be produced in June.

First production of heavy mineral concentrate is now expected to be achieved five to six weeks later, in August. The delay is not expected to impact Iluka's 2009 product sales objectives, as advised in an ASX Release dated 7 April.

While mining activity and final assembly of major plant is occurring, the company was recently advised1 of an unexpected delay in the fabrication and delivery of structural frames required to support two thickeners which are part of the pre-concentrator plant. The frames are being fabricated in Geelong, Victoria, under the supervision of the project's major contractor.

As a result, while commissioning of the mining unit plant and the wet concentrator plant will proceed during the quarter, first production of heavy mineral concentrate is now expected to be achieved slightly later than planned. Capital expenditure for the project is expected to increase by around 5 per cent relative to the original budget of $209 million, due mainly to additional costs involved in maintaining contractors on site for longer together with additional owners costs.

As a result of the delay, 2009 production and year end inventory levels in the Murray Basin will be lower than previously expected. On the basis of an August commissioning, and assuming no offsetting increases elsewhere in the Group, current year Iluka production would reduce by approximately 15 thousand tonnes of rutile and approximately 7 thousand tonnes of zircon.

The company's other major development, the Jacinth-Ambrosia project in South Australia continues to track ahead of schedule, and within its capital budget. On the basis of current progress, Iluka is increasingly confident about the prospect of first production of heavy mineral concentrate from Jacinth-Ambrosia being achieved in early 2010, ahead of the initial schedule of mid 2010.

 


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